Oceanic model

Nirvana Chaudhary, scion of the Chaudhary Group (CG), Nepal’s first and only Forbes listed billionaire group, once told me that the country’s next billionaire would come from the energy sector. When I narrated this to a colleague in the sector, the person scoffed at me, “Yeah, it’s easy for him to say that. He’s already a billionaire!”

The rise and eventual inclusion of Binod Chaudhary, the driver of CG’s remarkable growth, is as much a story of irony as it is of inspiration. CG began its remarkable rise to the Forbes billionaire list partly through Wai Wai, the instant noodles from Thailand that had everyone in Nepal licking their fingers soon after it was launched here. The group then diversified quickly into many other lines of business, becoming a global conglomerate in due course, but the humble finger licking instant noodle was a key catalyst in their initial stages of growth.

Who would have thought that the humble instant noodle, as foreign to Nepal as oil to water, would go on to produce its first billionaire? Electricity, on the other hand, an essential and integral part of our lives remains forever in short supply with 12 hours of power cuts daily. It has failed to produce even a single noteworthy enterprise, let alone a billionaire.

Nevertheless, Nirvana’s prophesy shouldn’t be so easily cast aside. Nepal’s electricity sector deserves a billionaire—in fact it needs several.Much like how CG looked abroad to something as alien as the instant noodle to begin on its path to the Forbes billionaire list, Nepal should look to something it doesn’t have for inspiration. Landlocked Nepal should look to the oceans to learn how to tap its hydro potential.

The ocean is an expansive space. No matter how many fish swim in it, there is always room for a few more.

The ocean is a cut-throat space. Big fish gobble up small fish. But no matter how many small fish the big fish gobble up, the small fish keep coming back. The little guys never die out—they keep multiplying everywhere.

The ocean is a layered space. Deep down, in the depths where light never penetrates, all sorts of strange creatures thrive. In the middle is another layer that is different from the one above and below. Finally way at the top, the one we see through our snorkelling glasses, are the small and large fish swimming together.

The ocean thrives in its own rhythm seemingly without any need for direction or coordination. The ones that live at the bottom never come to the top; those at the top never dive down to the bottom.

As a landlocked country Nepal doesn’t have access to an ocean but that shouldn’t stop us from learning from it.

Much like the ocean, Nepal’s hydro sector is in need of three basics. First, there the belief that it is big enough to accommodate everyone—enough to allow every enterprising soul to play in it. Second, though there are plenty of larger predatory creatures around, there is also plenty to go around so the little guys need to find a way of not dying and to keep coming back. Third, there must be a layered approach, where players select which layer to play in and stick to it.

Consider, as illustration, the final point on the layers of the ocean and its relevance to Nepal’s hydro.

Nepal’s hydro sector is in need of segmentation not just on paper but meaningfully in practice. Developers seeking to build 5 MW hydro plants are also hustling to peddle their influence in 500 MW plants. Those with the capacity to develop 100 MW plants are equally busy dabbling in 5 and 10 MW plants. It is a chaotic jumble where everybody is everywhere. The result: an ocean with no layers where all the fish die.

Nepal’s approach to hydro, and infrastructure, must differentiate between two layers: one for large projects and another for smaller projects.Start with the layer for the smaller projects first. This is the layer that should be home to the small and new in a vibrant competitive environment. This is the layer that nurtures young firms to build the strategy, organization and resource base that they will need to eventually graduate to the layer with the larger projects.

The players here need a stable political environment and a supportive policy framework to thrive. Political disruptions, poor policy and a hostile investment climate will significantly dampen activity. It would be ideal not to have such disruptions. But just like you can’t separate a cyclone from an ocean, you can’t remove disruptions from a political system, especially ours. The point though is that disruptions in this segment should be small by virtue of the fact that the projects in this layer are smaller.

There won’t be any billionaires coming out of this layer though it should help with the spawning process.

The other layer should be for large projects. On its own, each project here has a significant bearing on national infrastructure. Even the smallest failure has a large detrimental impact on national infrastructure.

This layer works best with limited or managed competition in collaborative models with a few select players. It is a segment where project development must be buffered from cyclones and the whims of political indulgence, de-politicized and shepherded to the finish line. These projects cannot be allowed to fail.

This is the segment where billionaires are made, if they can live up to their part of the bargain in delivering the infrastructure.All of this might sound like wistful longing of a landlocked country for the ocean. But that is not the case—Nepal’s approach to infrastructure development is already inspired by the layered ocean model.

Nepal Investment Board (NIB) has been charged with steering large infrastructure projects to the finish line, shepherding them through cyclones and political storms. Line ministries, such as energy, water and roads on the other hand, have the responsibility of growing the other layer with increased competition, effective policy and an enabling environment.

This distinction between the two layers was a clever institutional arrangement. It allowed the ministries, departments and agencies to focus on what they know how to do best: evolving the sector towards maturity and building the capacity of the private sector to participate more independently. At the same time, the distinction allowed NIB to focus on what it knows best: guide projects through the complex maze of clearances, agreements and approvals. Such guidance is necessary because the sector environment is far from mature at this stage.

The challenge now is to let everyone get on with their jobs. NIB must be allowed to steer large projects to the finish line. Ministries and other agencies must focus on enhancing the sector.

Along the way, new billionaires will be created, new infrastructure developed. Landlocked Nepal will become an ocean with different layers in balanced harmony and big enough for all fish, big and small, to swim along merrily.